From: Reuters
Published April 17, 2008 04:42 PM

Bill to rescue Calif. beach town finances at risk

By Jim Christie

SAN FRANCISCO (Reuters) - A bill in California's legislature to rescue a famed beach town from the brink of a rare municipal bankruptcy may stall under pressure from environmentalists, analysts say.

If the bill falters, Half Moon Bay, host of the Maverick's big-wave surfing contest, may need to sell debt at devastating cost to its small budget, its lawyers say.

State assemblyman Gene Mullin says his bill provides an escape from the legal problems threatening to empty Half Moon Bay's coffers.

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Environmentalists with considerable sway in California's legislature are lining up against it as it would open to development a wetlands area near the town's scenic coast favored by surfers and kite sailors.

"A lot of folks are here from local government so they understand the concern, but many here are very zealous about their environmental records," Mullin said in an interview.

The Democrat noted his good environmental voting record was failing to ease concerns among green groups about his bill on behalf of Half Moon Bay, which is situated along the coast 30 miles south of San Francisco.

"They like me. They don't like the bill," he said.

Paul Mason, deputy director of Sierra Club California, said the bill is dangerous as it would solve the town's money woes by waiving environmental laws in favor a property developer. "The issue is essentially the precedent," Mason said.

TURMOIL TO THE NORTH

Half Moon Bay's financial turmoil has been overshadowed by that of much larger Vallejo, California, about 30 miles to San Francisco's north.

Home to 130,000, Vallejo in March made national headlines as its officials discussed the potential of seeking bankruptcy protection.

They managed to strike deals with city employees to tackle the payroll issues that had unexpectedly opened a $6 million shortfall in the city budget that some in City Hall had said made bankruptcy inevitable.

By contrast, Half Moon Bay's money woes stem from the town of 12,000 losing a long-running lawsuit over a property dispute with a developer. That left Half Moon Bay initially facing a $40 million bill from a court judgment and legal fees -- or about four times its annual budget.

A settlement shaved Half Moon's Bay liability to $18 million, an amount Mullin's bill would erase entirely by granting building rights to the developer.

"It's already gone from $40 million to $18 million ... From $18 million to zero would be better," Mullin said.

Critics say Half Moon Bay can afford not to grant development rights because it could sell bonds to finance the $18 million payment. The town's lawyers say debt in that amount on a $10 million annual town budget would be a desperate measure and crushing burden on local finances.

"The better alternative would be to pass this one-off bill," said Lanny Davis, a lawyer representing Half Moon Bay.

According to Davis, Mullin's bill exclusively addresses the town's situation so other local governments could not apply it to their fiscal woes or to skirt environmental laws.

(Editing by Tom Hals)

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